How To Use The Fair Credit Reporting Act To Your Advantage

July 11, 2020CreditBy toptierfinancial

Using a credit card is easy — you use the card to buy things and then pay the credit card bill.

A credit card can sometimes be difficult, however, when dealing with your credit file. From a  missed payment to a loan that isn’t yours that’s incorrectly listed on your credit report, there are all kinds of ways your credit score can drop. And not all of them are from something you did wrong.

Consumers have protections under the law regarding their credit reports — which is where credit scores and credit problems are listed for lenders to check before offering you credit. Errors on a credit report can drop your credit score, making it harder to get a loan, credit card, rent an apartment, or qualify for insurance coverage, among other things.

The main law that protects consumers from credit errors is the Fair Credit Reporting Act, or FCRA. Here are some of the rights you have under this law and how to use it to protect your credit:

View credit reports

Fair Credit Reporting ActThe FCRA entitles you to review your credit file from each of the three main credit bureaus for free once every 12 months. You can do one check every four months from each of the three — Equifax, Experian and TransUnion — if you really want to be on top of it.

Start by going to AnnualCreditReport.com to request your credit file online. Only use that website and don’t use a copycat site that charges fees for what should be a free service. You’ll need to verify your identity to get online access. You can also request your credit file through an automated phone system or the mail.

The FCRA applies to all consumer reporting agencies. You can also look at reports from other consumer reporting agencies that collect noncredit information about you. These include rent payments, insurance claims, employers and utility companies. The Consumer Financial Protection Bureau lists the reporting companies and how to request a free report from each.

Check your credit score

The law allows you to request a credit score, though it’s legal for credit agencies and other businesses to charge you a fee for this service. Some credit cards provide scores for free, so check with your credit card issuer first.

A credit score isn’t the same as a credit report. Information in a credit report determines a credit score, and each credit bureau can use a different scoring model that requires it to provide different information. You have different credit scores, depending on which factors are weighed more heavily.

Monitoring your credit is vital. Make sure that you review your credit report for any inaccuracies.

Know who can view your credit report

The FCRA doesn’t allow a credit reporting agency to share your credit file with someone who doesn’t have a valid need. Some inquiries, such as from a potential employer or landlord, require your written consent. And, they can only check your credit report, not your credit score.

The credit reporting agencies can share your credit report for legitimate reasons, such as when you’re applying for credit, insurance, housing or with a current creditor.

Disputing errors

Getting a credit report in your hands can lead to all sorts of eye-opening concerns. Anything that’s listed as negative should be checked for accuracy. Here are some things to look out for:

Eviction that wasn’t legal.
Creditor listed that you didn’t have an account with.
Loan default.
Wrong name.
Wrong address.
Wrong Social Security Number.
Incorrect loan balance.
Closed account reported as open.
A loan you didn’t initiate.

Some errors may be simple to resolve and others you may need to do more research on before disputing them to ensure they’re incorrect.

For example, you may not recognize the name of a creditor and assume you don’t have an account with them. But it may just be a store credit card you recently applied for that is listed by the issuing bank’s name. Or maybe a home or auto loan was sold to a new loan servicer.

Other errors could be reason to suspect identity theft, or there could just be wrong information that’s bringing down your credit score.

If you suspect identity theft, such as someone taking out a credit card in your name, then file a police report and report it to your credit card company and the credit reporting agencies.

To dispute erroneous information, use certified mail to send the credit bureau a letter and copies of documents explaining the error. If a loan still shows an outstanding balance and you have written proof that it was paid off, for example, send a copy to the credit agency.

The Federal Trade Commission has a simple sample letter to dispute errors on your credit report.

Credit agencies have 30 days to investigate and respond to your dispute, unless they deem it frivolous.

If it corrects an error, it must send you a free copy of your credit report through AnnualCreditReport.com so you can see that the corrections have been made.

A time limit to negative information

The FCRA doesn’t allow credit bureaus to report negative information that’s more than seven years old, though it allows some forms of bankruptcy to remain on a credit report for 10 years.

There’s also a time limit for positive credit information such as on-time payments and low balances — up to 10 years after the last date of activity on the account.

Rejections based on credit report

If your application for credit, job, insurance or housing has been denied because of information in your credit report, the law gives you the right to know this information.

The landlord, employer or other entity that denied your application must notify you and give you the name, address and phone number of the credit reporting agency that provided the information.

The FCRA allows you to get a free copy of your credit report from that reporting agency within 60 days of the action against you. That’s in addition to the three free credit reports allowed annually.

To best deal with a potential rejection ahead of time, it’s smart to check your credit report before applying for credit, rental unit or related use of your credit report and check it for errors. Give yourself enough time to fix them.

Go to court

If these actions or a complaint with the CFPB doesn’t resolve your dispute, you may be able to sue for damages in state or federal court. You can sue a credit reporting agency or related parties for violating any of the above rights.

However, it’s worth knowing that your right to legal action doesn’t start until after the creditor or credit reporting agency has been notified of an error and has a chance to fix it. In other words, you’ll only be awarded damages if the adverse action happened after you reported the error.

So if you didn’t get approved for a mortgage because of a mistake on your credit report, it’s unlikely you’ll be compensated for losing out on the house if you lost out on it before reporting the mistake.

The post How To Use The Fair Credit Reporting Act To Your Advantage appeared first on Better Credit Blog | Credit Help For Bad Credit.

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How the Coronavirus is Impacting the Military Community

July 7, 2020CreditBy toptierfinancial

As the effects of the Coronavirus linger and continue to impact millions of Americans, one group of consumers—members of the U.S. military—faces additional challenges and hardships. Of particular concern are costs created by restrictions on travel (especially during the peak military moving season) and hardships related to changes in employment. Here is a closer look at these negative impacts, along with resources for affected service members and their families.

Housing Costs

For most people, housing is one of the biggest line items in a monthly budget. For some in the military, this line item has doubled because of the Coronavirus. Military families planning to move as part of a Permanent Change of Station (PCS) may be paying rent or a mortgage on two properties. That is because many families had developed their plan for moving to a new location, including signing a lease or mortgage, only to find out shortly thereafter that COVID-19 would derail those plans. The Department of Defense announced a Stop Movement Order in March, and that order has been extended at least to June 30.

This can be especially problematic for families who were moving to a more expensive area. Their compensation may be scheduled to increase (adjusted for the higher cost of living), but the increase has not taken effect yet because they have not moved. Therefore, some families may be on the hook for more expensive properties but do not yet have an increased salary. And in some cases, families have lost their earnest money deposit (made as part of a home purchase to show good faith that a buyer intends to move forward with the purchase), again because of circumstances outside of their control.

Housing costs are not the only expense that has resulted from this situation. Many families may have already moved some of their belongings, anticipating that they would be without them for just a few weeks. Now that those items have been shipped or stored, and families are left stranded, many have incurred replacement costs to cover essential items like clothing and toiletries.

This PCS season has been far from ideal, and the impact has been widespread. An Army spokesperson told CNBC that approximately 24,000 families were affected in the Army alone. Affected personnel and their families can review these policies and tips to learn more about potential options available that may help offset the hardships associated with a delayed PCS. Service members may also look into the mortgage forbearance options provided under the CARES Act.

More generally, affected families should try to cut as many nonessential expenses as possible. If a family does not have a formal budget in place, now would be the perfect time to make one and to keep it relatively lean. Though the situation is still unfolding, families can develop some sense of certainty by making a plan and sticking to it.

Alternative Work Arrangements and Spouses’ Employment

Like other industries, the military has been forced to adapt its procedures to meet the demands of the COVID-19 environment. This means engaging in careful consideration of what is “essential” and what must be done on site or can be done remotely. These decisions are certainly more difficult in the context of an institution designed to serve and protect us. The Department of Defense has published extensive guidelines on these policies, which also cover impacts to pay and benefits.

Military spouses are also facing new challenges which can affect a family’s financial stability. Spouses may be facing additional responsibilities at home, particularly related to childcare. Given widespread unemployment across the country, many spouses have lost jobs or faced reduced hours as a result of COVID-19 as well.

Other Challenges

These stressors may make it harder for families to meet their basic needs. Some families face food insecurity, and on-base food pantries have reported increased demand. Many military families are ineligible for additional benefits that could help, like the Supplemental Nutrition Assistance Program (SNAP), sometimes due to the size of their housing allowance. In addition to finding support on base, these families can consult this extensive list of resources for help.

The pandemic has created an environment that takes its toll on mental health, with most Americans reporting that they experienced financial stress from COVID-19. Service members and their families may struggle to see the light at the end of the tunnel, given the unique challenges they face. Thankfully, there are many resources available both to the general public and through the Department of Defense.

Moving Forward

Military families are battling many of the same challenges that other Americans are facing as a result of the Coronavirus. However, their hardships may be more pronounced as a result of the military lifestyle. If you or someone you know is facing increased expenses or hardship because of PCS, reduced hours or unemployment, food insecurity, or some other financial challenge, consider speaking with an NFCC-certified credit counselor to help review the situation and make a plan for the future.

The post How the Coronavirus is Impacting the Military Community appeared first on NFCC.

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Being Bothered by a Debt Collector? Here’s How to Tell if the Debt is Legitimate

July 5, 2020CreditBy toptierfinancial

It is never a pleasant experience to receive phone calls or other communications from a debt collector. What’s worse is that sometimes collectors may contact consumers about debts that are not legitimate. To protect yourself from a creditor collecting something they don’t deserve to receive—something you don’t owe—you will need to take an important, and time-sensitive step: verify the debt’s legitimacy. Here’s how.

Possible Scenarios

In some cases, you may receive a collection call that you were fully expecting to receive. You knew you that your delinquent account was sent to collections, you remembered exactly what you owed, and you knew the collector would be making attempts to collect. However, there are quite a few scenarios that are not so straightforward.

You don’t remember the debt. A collector could contact you about a debt you have never heard of and do not recall ever owing. In this case, you would not want to blindly pay the debt or even promise to pay the debt. The collector may simply have gotten the wrong information or you could be targeted by a fake collection scam. Verifying the debt will ensure that you do not pay money to a scammer and can clarify the origin of the debt. Maybe you are a co-signor and simply forgot about taking responsibility to cover the debt, or maybe there is a genuine error.

The amount looks wrong to you. Let’s say you knew that one of your debts would be sent to collections. It was a credit card bill for $500. A few months later you get a call from a collector demanding $1,000. Something is not adding up. Verifying the debt will help you sort this out.

The debt is very old and may be “zombie debt.” When debt is of a certain age it passes the statute of limitations (which varies by state law). This means that the collector cannot legally sue you. However, if you make a payment, the statute of limitations could reset, which would refresh the collector’s right to sue you. Collectors who go after zombie debt are known for using especially deceitful tactics. Verifying the debt can ensure that you do not fall for one of their tricks and restart the statute of limitations.

How to Validate and Verify the Debt

Your rights to clarify the legitimacy of a collected debt come primarily from the Fair Debt Collection Practices Act (FDCPA). This federal law controls what debt collectors can do in their collection efforts.

Validation

When a debt collector contacts you about a debt, there are several pieces of information that they must provide. As the CFPB explains, these are:

The creditor’s name
The amount you allegedly owe
Your right to dispute the debt within 30 days and their right to assume the debt is valid if you do not
Your right to dispute the debt within 30 days, and that they will provide verification if you do
Your right to request the name and address of the original creditor within 30 days, and that they will provide the information if you do

A collector must provide this information during the first contact with you or via a written notice within five days after initially contacting you. The information provided by the collector is called the “validation notice.” The CFPB gives two important warnings about this. First, if the collector initially calls you by phone, demand that they contact you in writing. Second, do not give any personal or financial information until you confirm that you are dealing with a real debt collector.

Verification

After receiving the validation notice, you can dispute the debt, which means you will submit a letter to the collector, demanding that they verify the debt. This is your right according to bullet #4 above. Important: You technically must submit the dispute/verification request within 30 days of when you received the required information (the validation) from the collector. You should act quickly to ensure your compliance during this timeframe. However, a collector can (and most probably would) provide the information even if you request verification after the 30-day deadline has passed.

Your letter essentially just needs be dated and needs to say “I don’t owe this debt unless you can prove it, so prove it.” To make the letter a bit more formal than that one-liner, consider using the free template from the CFPB. Simply fill in your information into the letter template where indicated and mail it to the collector. Keep a copy for your records. Ideally, you will send it with a return receipt so you have proof of sending the letter and the date it was sent.

Once you submit the letter, the collector cannot contact you to make collection attempts until they provide you with verification of the debt.

Other means of verification

In addition to your rights under the FDCPA, described above, you can try a few other tactics to verify a debt. These steps may simply jog your memory about the debt if you have forgotten, or they could affirm your suspicion that the debt is not legitimate. These are simple and quick, and could be done before or after you formally dispute the debt.

First, check your credit report. Make sure that what the collector told you lines up with what your credit report indicates. If the collector is referencing a debt you have no recollection of and that debt isn’t even on your credit report, that should raise a red flag. Second, you can contact the alleged original creditor to inquire about the debt. This can help ensure that the original creditor did in fact sell the debt to the collector as the collector claimed.

Verification is Worth It

If you are contacted by a collector about a debt that does not sound familiar to you, then you should probably dispute the debt, in accordance with your rights under the FDCPA. You have nothing to lose in taking this protective measure. The process may just reveal that you owe the debt, but at least you will have peace of mind from knowing who to pay and how much to pay. On the other hand, the collection attempt may not be legitimate. You could be the target of a scam or an error. In either case, you will be glad you did not pay something you did not owe.

The post Being Bothered by a Debt Collector? Here’s How to Tell if the Debt is Legitimate appeared first on NFCC.

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Ask an Expert: Should I cancel a credit card if I get a new one? How will this affect my credit score?

July 3, 2020CreditBy toptierfinancial

Question: I have 3 credit cards that I have paid off. If I was to accept an offer from another credit card company that offers me better services would it affect my credit in a positive or a negative way? Should I cancel any of the cards that I have paid off or leave them opened?

Dear Reader,

Congrats on paying off your cards. That’s certainly something to celebrate! Because you have been paying off your cards on time and in full, your credit score has increased. When you have a higher score, you have access to better offers from lenders and creditors, which includes lower interest rates and reward programs. However, that doesn’t mean that you should apply for the first good offer that you see or close one of your paid-off credit cards.

Anytime you ask for new credit, even if it’s a pre-approved offer sent to you, the creditor will run your credit and generate a hard inquiry on your credit report. This hard inquiry stays on your report for 24 months and affects your score negatively for some time. According to FICO, each inquiry can lower your score 5-10 points. But the real impact will depend on your overall credit health. If you have multiple inquiries in a short period, it can be even more detrimental to your credit. Lenders can interpret this as a sign that you are overspending or can’t pay your bills. But, if you are shopping around for rates for a mortgage or auto loan, multiple inquiries count as just one if done in a certain period of time.

So, you have to be selective and compare offers from different lenders online when applying for a new card. A few new perks may not be worth the temporary decrease in your score. An alternative to getting a new credit card with more benefits is to ask your current lenders to upgrade your cards. Creditors are often willing to work with you, especially if your accounts have been in good standing. Sometimes, they can do it without pulling your credit.

Now, even if you get a new card, I don’t recommend closing any of your cards. You should consider closing your cards if you have trouble controlling your spending or are paying an annual fee on the card. But other than that, closing a credit card can do more harm than good to your credit report. Whenever you close an account, you can affect your utilization ratio, which compares your total available credit to your total credit card debts. Your credit utilization ratio is one of the factors that influence your score the most, almost as much as always paying on time. The lower your credit ratio, the better your score. If you close a credit card and have balances in your other credit cards, your utilization ratio will increase, and consequently, your score may drop. Keeping the card open with a zero balance can help you maintain a lower utilization ratio when you start using your other credit cards.

Another thing to keep in mind before you decide to close an account is that it can reduce your credit report age. To calculate your score, FICO also takes into consideration the average age of all your accounts and for how long you’ve had each account. When you close an account in good standing, it will stay on your report for seven years. After that, it will be removed from your report. And with it, all the positive history you had, including its age, which could lead to a drop in your score. The longer you’ve had credit for, the better.

Understanding how your credit card use affects your score is a wise step to effectively manage your credit and boost your score. Each credit report is unique, and each action we take affects us uniquely. Consider keeping your paid-off credit cards open and try upgrading them before getting a new one. The key to building your credit is to use your credit card responsibly. This means using less than 30% of your available credit, paying in full and on time every month, and limiting how often you get new credit. Good luck!

The post Ask an Expert: Should I cancel a credit card if I get a new one? How will this affect my credit score? appeared first on NFCC.

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Scam Alert: Watch Out for these COVID-19 Scams

July 2, 2020CreditBy toptierfinancial

Consumers already have a lot on their minds right now, given the ongoing economic roller coaster ride, which shows no end in sight. Add one more item of concern to that list: pervasive and malicious scams. Of course, scamming activity is always a threat, but consumers should be on even higher alert now. Scammers like to take advantage of chaotic situations, and the COVID-19 pandemic is no exception. Here is a closer look at some common scams and tips for avoiding them and protecting your personal information.

Personal Protective Equipment (PPE) and Coronavirus Treatments 

These two schemes prey directly on people’s concerns about the Coronavirus and their efforts to keep themselves and others safe. The first involves fake offers for PPE or for equipment used to manufacture PPE. In one variation of the scam, a fake seller will offer PPE, will only want to discuss the sale via telephone or email, and will demand payment immediately. The buyer is left with no way to verify the seller’s credentials. Chances are, if the seller will not prove their existence and legitimacy as a distributor of PPE, it’s a scam.

Another variation may involve a work-from-home scheme, advertised as a way to earn money by making PPE for other people. Sounds like a great thing, right? But here’s the problem: the “employer” will require payment for some type of manufacturing equipment. Again, the seller/employer will be impossible to verify. Don’t fall for it.

Another scam involves the promise of Coronavirus treatments. This scam boils down to false advertising. You might actually get something in return for your money, but it will be merely an unverified “treatment” with no scientific basis as a cure or preventative treatment. The FTC has cracked down against companies advertising these treatments, and reports that most have stopped. So, this scam may pose less of a threat in the future.

Tips: Do not pay for PPE (or anything else for that matter!) without verifying the legitimacy of the seller in multiple channels. Remember that there is no proven, publicly available Coronavirus treatment.

Contact Tracing and Mobile Banking Apps

As you may have heard, contact tracing is an important tool used by health officials to limit the spread of Coronavirus. It allows officials to find and notify the people who have been in contact with someone known to have the virus. Scammers are taking advantage by sending text messages telling people they have been exposed to the virus. The texts include malicious links, which when clicked can place dangerous software on your phone and potentially grant access to sensitive information. This scam may also include phone calls, in which a fake “health official” asks for information like your social security number.

Through this scam or others like it, spammers can put trojans or other malicious software on your phone. These sophisticated tricks can replicate applications on your phone to look like the real application, but are actually additional “layers” that steal your information (account names, numbers, passwords, etc.). As people are staying in their homes more, mobile banking is becoming more popular and is a particularly concerning target for these spammers. See this guidance from the FBI about how mobile banking scams work and steps you can take to improve your security.

Tips: Never give out your Social Security Number or other private personal information over the phone, particularly to someone who made an unsolicited call to you. Follow the general tips to be on guard against government impostor scams. Do not click links from text messages unless you are certain that the source can be trusted. Consider options to filter unwanted text messages on your phone. Use multi-factor authentication on your important accounts, to provide an extra layer of security between hackers and your accounts. If you have important information on your phone, consider backing up the device regularly.

Unemployment Benefits

Unemployment claims have increased significantly since the pandemic began, and the CARES Act expanded unemployment benefits. Now, scammers have devised a way to file for unemployment on your behalf and have the money routed to them. This specifically targets people who have not filed for unemployment. The FTC has called this a “large scale scam,” so you want to be on the lookout for suspicious activity. The tell-tale sign you have been affected is if you receive a letter about your unemployment benefits, but you never filed an application. If that happens, the FTC recommends that you notify your employer, report the fraud to your state unemployment office, report the fraud to the FTC, and review your credit reports. See their full recommendations here.

Tips: Keep a close eye on your mail during the pandemic. Do not throw mail from an unemployment office away thinking that it does not apply to you. If you receive a letter referencing an application for benefits that you did not submit, follow the FTC guidelines (linked above) immediately.

Utility Shutoffs

This is not a new or innovative scam, but it is a timely trick. With many people struggling to make ends meet, the threat of a utility shutoff may seem very real. However, you must be on the lookout for fraudsters who call, purporting to be your utility company. The scam can take many forms, including one where they do not claim you owe anything but actually claim that they need to process a refund! The absolute best rule is to hang up and call your utility company directly, using a trusted number from your bill or website. Also, check out the AARP’s guide to avoiding these scams.

Tips: Do not give any payment or other personal information to someone in an unsolicited “utilities” call. Call the utility company directly to inquire about the status of your account.

Be Careful!

As you can see, there are many ways that scammers are trying to take advantage of people in the current chaotic environment. Stay alert and follow these tips to avoid becoming a victim. If you are ever uncertain about whether a request is legitimate, remember that it is better to be safe than sorry.

The post Scam Alert: Watch Out for these COVID-19 Scams appeared first on NFCC.

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